Financial Guarantee Template for Indonesia

Financial Guarantees are essential instruments in Indonesian business transactions, particularly in securing financial obligations and facilitating commercial relationships. This document template is designed for use when one party needs to provide financial security for another party's obligations, commonly seen in lending arrangements, project financing, or corporate group structures. The guarantee agreement must comply with Indonesian law, specifically the Civil Code (KUH Perdata) Articles 1820-1850 governing guarantees, and relevant Financial Services Authority (OJK) regulations. The document contains provisions for enforcement, default scenarios, and recovery mechanisms, structured to be valid and enforceable under Indonesian jurisdiction. It is particularly important in scenarios where financial institutions require additional security for loans, where parent companies guarantee subsidiaries' obligations, or in project finance arrangements where sponsors provide completion guarantees.

1. Parties: Identification of the Guarantor, Principal Debtor, and Beneficiary with their complete legal details

2. Background: Context of the guarantee, including reference to the underlying obligation or facility being guaranteed

3. Definitions: Definitions of key terms used throughout the guarantee agreement

4. Guarantee and Indemnity: Core provisions detailing the scope of the guarantee, including the guaranteed obligations and indemnity provisions

5. Nature of Guarantee: Specification that this is a continuing guarantee and details of whether it is conditional or unconditional

6. Payment Provisions: Terms governing when and how payments must be made under the guarantee, including currency and method

7. Representations and Warranties: Guarantor's confirmations regarding their capacity, authority, and financial condition

8. Preserving Validity: Provisions ensuring the guarantee remains valid despite changes to the underlying obligation or circumstances

9. Event of Default: Circumstances that trigger immediate enforcement of the guarantee

10. Enforcement and Recovery: Mechanisms for enforcing the guarantee and recovering payments

11. Costs and Expenses: Allocation of costs related to the preparation and enforcement of the guarantee

12. Notices: Communication procedures between parties

13. Governing Law and Jurisdiction: Confirmation of Indonesian law governance and jurisdiction for disputes